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How To Pay Off Your Car Loan Fast
Cars are essential in areas that do not have a well-made public transportation system. Perhaps you’re considering buying a car but lack the cash on hand to pay for it out of pocket. Using a car loan adds new financial responsibilities along with car maintenance costs.
Paying off a car loan is essential for keeping as much money as possible. The longer it takes to pay off your car loan, the more interest you accumulate. You will want to start paying off a car loan fast.
Top 5 Ways To Pay Off Your Car Loan Fast
Your car loan will provide the details to determine your next steps. By acting wisely, you can shorten this process by several months.
Determine Your Current Balance
Check your car loan to determine how much you owe overall. You will owe the principal and interest over time. Some lenders will automatically provide the total interest amount based on your loan term. It is also possible to calculate it if you know your APY (annual percentage yield), pay frequency, and loan term by using an online balance calculator.
Calculate How Much You’ll Save
If you can pay more than the minimum, calculate how much the increased loan payments will reduce your overall interest. However, you should check your loan agreement for any prepayment penalties. Some lenders include them since they make more money off of interest than a paid principal. If there are prepayment penalties, include them in your calculations and see whether it is still worth making extra payments.
Make Biweekly Payments
In the absence of prepayment penalties, paying biweekly instead of monthly to meet your payment requirements means you pay faster overall. Because there are more than 28 days in most months, certain months will allow you to make three payments. Consider this one year of a loan with minimum monthly payments of $600:
● Following the regular payments, you pay $600 a month for 12 months = $7200
● Following biweekly payments, you pay $300 for 26 weeks = $7800
In this example, biweekly payments increased the overall payment amount by $600, thus decreasing the time you spend paying off your loan in full. Even a little bit of extra payment toward your loan can be helpful.
Consider Refinancing
If you already have a car loan that you have been paying for a while, you may consider refinancing. Refinancing replaces your current car loan with a new one, most likely with a lower interest rate. It is possible to negotiate this, especially if you have made consistent payments.
However, if lower interest rates come with longer loan terms, credit score damage, and prepayment penalties, you would be paying more overall than on your current loan. Talk to your lender about the potential for refinancing your car loan and paying off your car loan fast.
Review Add-ons
The add-ons to your loan payment increase the number of fees you would pay from the initial contract. You should review your loan agreement and the paperwork to find which potential add-ons you have. Some include:
● Tire and wheel protection
● Key protection
● Guaranteed asset protection (GAP) waivers
● Service contracts
While some of these add-ons may be necessary, you may be able to remove others, especially if they are jacking up the cost of your car loan with additional fees. Try speaking with your dealership or lender to discuss which add-ons you could remove and how.
Conclusion
By following these steps, paying off your car loan fast is within your reach. If you have a car or want to buy a car and are unsure about the financing process, contact 1803 Capital, LLC. We find the best ways for you to finance or refinance your auto loan and help you drive yourself to debt freedom. Call us at (866) 258-2950 today to learn more!
